NextGen Healthcare Inc (NXGN, Financial) recently experienced a daily gain of 6.31%, culminating in a 3-month gain of 29.42%. Despite an Earnings Per Share (EPS) of 0.03, questions arise regarding the stock's fair valuation. This article aims to provide a comprehensive analysis of NextGen Healthcare's valuation, encouraging investors to delve deeper into the financial intricacies of this healthcare trailblazer.
Unraveling NextGen Healthcare
Based in the United States, NextGen Healthcare Inc offers an array of healthcare solutions. The company's technology and services platform caters to ambulatory and specialty practices of all sizes, providing software, services, and analytics solutions to medical and dental group practices. With a current stock price of $20.55 and a market cap of $1.40 billion, NextGen Healthcare's valuation aligns closely with its GF Value of $20.53, indicating a fair valuation.
Deciphering the GF Value
The GF Value is a unique measure of a stock's intrinsic value, derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. It serves as a benchmark for the ideal trading value of a stock. If a stock's price significantly surpasses the GF Value Line, it may be overvalued, indicating potentially poor future returns. Conversely, if the price falls significantly below the GF Value Line, higher future returns are likely.
According to GuruFocus Value calculation, NextGen Healthcare (NXGN, Financial) is fairly valued. Given this fair valuation, the long-term return of its stock is likely to align closely with its business growth rate.
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Assessing Financial Strength
Investing in companies with low financial strength can result in permanent capital loss. Thus, it's crucial to scrutinize a company's financial strength before investing. NextGen Healthcare boasts a cash-to-debt ratio of 0.8, ranking better than 52.29% of companies in the Healthcare Providers & Services industry. This suggests a fair balance sheet, earning NextGen Healthcare a financial strength rank of 6 out of 10.
Evaluating Profitability and Growth
Consistent profitability over the long term reduces investment risk. NextGen Healthcare has been profitable 9 out of the past 10 years, with a revenue of $678.10 million and Earnings Per Share (EPS) of $0.03 in the past twelve months. However, its operating margin of 1.41% ranks worse than 56.11% of companies in the Healthcare Providers & Services industry, suggesting fair profitability.
Growth is a critical factor in company valuation. NextGen Healthcare's 3-year average revenue growth rate is worse than 58.49% of companies in the Healthcare Providers & Services industry. Its 3-year average EBITDA growth rate is -5%, ranking worse than 73.47% of companies in the industry, indicating subpar growth.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. If the ROIC surpasses the WACC, the company is creating value for shareholders. Over the past 12 months, NextGen Healthcare's ROIC was 0.34, while its WACC stood at 7.98.
Conclusion
In summary, NextGen Healthcare's stock appears to be fairly valued. The company exhibits fair financial condition and profitability, although its growth ranks worse than 73.47% of companies in the Healthcare Providers & Services industry. For a more detailed understanding of NextGen Healthcare, you can explore its 30-Year Financials here.
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